How Monero Uniquely Enables Circular Economies

By Seth For Privacy

One of the most important aspects in the survival and growth of cryptocurrencies and their usability is the formation of circular economies. We have seen these pop up at small scale within Bitcoin and other cryptocurrencies, but Monero has multiple attributes that uniquely enable us to build and participate in circular economies.

What are circular economies?

While I’m sure you all are loosely familiar with economies as a broad topic, the idea of a “circular economy” is one that is rarely discussed outside of the cryptocurrency world. What makes circular economies so important and special are that they create truly free markets that allow the trading of services, products, and goods directly for Monero.

Participants don’t need to constantly be moving in and out of fiat, but can keep their Monero within the system, earning, saving, and spending directly in Monero without the friction, surveillance, or restrictions of the normal economy.

Circular economies are generally completely “above board” and legal, but function more as “grey markets” compared to the normal “white markets” in the fiat world.

Why do we need to build circular economies?

1. Remove the reliance on the state’s approval and ID system

This point may not stand out to most westerners or people who have lived with the ID system in a stable country, but our reliance on state-issued IDs and approval in order to conduct business, earn a living, and buy what we need to survive enables the state to easily cut off those they deem “non-compliant”.

This is not just criminals, and can be political dissidents, religious minorities, racial minorities, etc. This control lets the state dictate who can and cannot engage in commerce, who each of us can transact with, and what we can buy/sell – essentially choosing life or death for each citizen based on compliance.

Removing this reliance by building circular economies removes the states power over our ability to engage in an economy, letting us survive and thrive no matter what the state thinks of us.

2. Reduce the governments control of Monero and Monero users via fiat on/off-ramps

The incredibly strong privacy guarantees and decentralization of Monero make it extremely difficult (or even impossible) to prevent people from using it how they see fit. Because of the strong technical base for Monero’s power as a tool for freedom, governments are rapidly realizing their best chance of controlling Monero users or reducing the effectiveness of the network is to control who can get access to Monero while compiling a nice and tidy list of Monero users via Know-Your-Customer (KYC) exchanges.

When we build out circular economies we do not need to use fiat on/off-ramps as frequently (or even at all!), and so can remove that point of government control over our actions.

We can also do this by refusing to use centralized KYC exchanges, and trading peer-to-peer here on LocalMonero.

How does Monero uniquely enable these circular economies?

While Monero shares some of the core attributes of Bitcoin that enable circular economies in a new way (censorship-resistant payments, p2p transactions, etc.), it brings an absolutely unique empowerment to those wishing to build and engage in circular economies.

1. Monero enables global p2p transactions without fear of surveillance or censorship

Monero users do not need to worry about mass surveillance or even targeted censorship of their transactions, enabling unique peace of mind and preventing any burdens on commerce. You can transact with anyone in the world, at any time, without any surveillance using the Monero wallet of your choice.

2. Fungibility removes the risk of tainted coins and ensures trust

As Monero is fungible (1 XMR equals 1 XMR, no matter what), participants in the circular economy don’t need to worry about the funds they are sending or receiving. Any Monero they send cannot be traced back to their other transactions and has no history and thus cannot be censored based on history, and Monero received will always be able to be spent freely at full market value. This fungibility adds to the peace of mind of participants, ensures that chain analysis firms cannot force their way into circular economies, and prevents a breakdown of trust in Monero as a method of exchange.

The current breakdown of trust in Bitcoin as a method of exchange is leading to it rapidly losing traction in circular economies where Monero is present. People don’t want to have to check funds for taint, worry about if they will be able to spend them freely, or feel the need to use any chain analysis tools to protect themselves from legal or regulatory issues.

3. Monero’s low fees ensure a free flow of commerce

One of the simplest points to grasp about Monero transactions is that transaction fees are incredibly low and will remain reasonable in the long-term thanks to the tail emission and dynamic block size.

These low fees make sure that commerce can flow freely no matter the amount of blockchain congestion, further reducing the mental burden and stress on participants to try and time their transactions or wait hours/days to confirm low-fee transactions. With fees around 1c today, you can transact freely with any size of transaction without worry about fees down the line.


Ultimately, Monero is digital cash as it should be. The peace of mind, fungibility, and privacy of transacting in cash but with all of the advantages of digital, global, and p2p transactions detached from the states control or surveillance. This ability to act as digital cash is uniquely enabling circular economies today and helping them to grow and prosper over time in ways that other cryptocurrencies like Bitcoin simply can’t.

How can I learn more?

Further reading